EBay CEO Donahoe: Exempt Small Businesses From Internet Sales Tax

EBay boss John Donohoe laid out his detailed opposition to the Internet sales tax bill currently before the Senate in an op-ed for The Wall Street Journal.

The bill should exempt small businesses from having to collect sales taxes for states other than their own, wrote Donahoe, who has spearheaded opposition to the measure.

“The trouble with the bill is that it treats mom-and-pop businesses the same way as it does multibillion-dollar retailers. Yet a small business with a dozen employees simply can't be lumped in with national behemoths such as Amazon and retail chains that have warehouses and stores around the country.”

So the Marketplace Fairness Act needs an exemption for small businesses, Donahoe says.

Currently small businesses that sell online must collect sales taxes on purchases made in the state where they are based. “That is fair,” he says.

“But the proposed bill would require them to collect sales taxes on behalf of every state where they make a sale. That would make it difficult, if not impossible, for them to succeed.”

Donahoe says he has first-hand evidence for that opinion. “I've heard repeatedly from small business owners who sell in the eBay marketplace and other online channels that expanding Internet sales taxes to all transactions would hurt their ability to grow or create jobs and to fuel the price and service competition that creates value for consumers.”

EBay’s solution is exempting small businesses with fewer than 50 employees or with less than $10 million in annual out-of-state sales from having to collect sales taxes nationwide.

“These are reasonable exemptions, equivalent to other federal standards, such as those set by the Affordable Care Act and the Treasury Department's Office of Tax Analysis,” Donahoe wrote.

He cited the case of Colleen Rast, who employs three people in a clothes-selling business in Kallispell, Mont. Under the bill, she who would have to deal with the laws of more than 9,600 tax jurisdictions across the country, he claimed.

“It would create costly paperwork and accounting burdens and subject her to potential audits and litigation from tax collectors in states that are more than 1,000 miles away from where she lives and works,” Donahoe said.

EBay’s proposed exemption would protect businesses like that. “This is a reasonable exemption that recognizes that small businesses are vastly different from the nation's billion-dollar retailers.”

The argument isn’t about the Internet versus Main Street, Donahoe insisted. “This is about big retailers, like Amazon, trying to undermine small online businesses.”